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The Warsaw Voice » Business » December 21, 2011
Business & Economy
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Time for action
December 21, 2011   
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Economists and businesses alike are expecting the government to take resolute steps to reform the economy. While Poland has been quite efficient in dealing with the effects of the global crisis, nobody can guarantee that the problems recently encountered by Greece, Italy, Portugal, Spain and several other countries will never hit the Polish economy—especially as forecasts for the coming years are not very promising. Predictably, then, economists have been urging the government to embark on reforms as soon as possible, because the economy needs healthy foundations in order to weather the anticipated second wave of the crisis.

On the whole, the government’s recent announcements of structural reforms have been well received by economists, but there is still some uncertainty as to whether it will really launch the reforms soon.

Economists from PBP Bank say Poland can retain its status as a “green island” amid the sea of crisis—if not in terms of GDP growth, then at least in terms of structural reforms, which have been slow in coming in Europe so far. Success is highly likely, because no government after 1989 had a more reform-friendly environment available. To begin with, there will be no elections in the next three years. Second, the ruling Civic Platform (PO) party won a strong mandate in the Oct. 9 general elections. Third, the specter of the crisis is weakening various interest groups.

One of the strongest advocates of swift and thorough reforms is the Civil Development Forum (FOR), a think tank established by Leszek Balcerowicz, a former deputy prime minister and ex-finance minister. According to FOR, the most pressing challenge for the government is to improve Poland’s public finances by abolishing pension privileges for selected professional groups, among other moves.

The pension system should be modified to apply the same rules to all professional groups, including those that were so far excluded from it, such as uniformed services, miners and farmers. Savings should also be sought outside the pension system by ensuring better management of public administration support services and adjusting the number of teachers to the declining number of students in schools. Economists from the Civil Development Forum are also proposing to radically simplify the tax system by standardizing VAT rates and abolishing ineffective tax breaks and preferential rates.

One more—so far missed—opportunity to stimulate economic growth is deregulation, FOR says, adding that Poland should address regulations that constrain market development and hinder competition in areas such as legal professions.

Enterprises affiliated with the Polish Chamber of Commerce (KIG) have welcomed the reform proposals Prime Minister Donald Tusk announced in his policy speech, but they too are expecting the government to act firmly to radically deregulate the economy. According to the Polish Chamber of Commerce, Poland also needs thorough administrative reform. The business community expects ministers to not only curb the steadily growing number of bureaucrats, but also speed up the introduction of e-government.

Those encouraging the Polish government to carry out reforms also include international financial institutions and rating agencies. Many hope the government will now have enough determination to deliver on its promises—rather than just talking the talk, as was the case in the past.
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